Major Shareholder:

• Mr. Lee Wan Keung ¡V 73.9% interest

The Group is principally engaged in the manufactured and sale of handbags, which include ladies' handbags, tote bags, cosmetics bags, children's bags, backpacks, portfolios and soft luggage products. The Group's products are made of a wide variety of materials such as PVC, imitation leather, nylon and various types of textile materials.

The Group has a broad and diversified base of customers located in the US, Europe, Hong Kong, Japan and South America. Currently, all of the products of the Group are manufactured in the PRC. The Group's products are manufactured either on an OEM basis for owners or licensees of brand names or with the Group's own design. The Group's products are usually sold to the overseas importers and chain stores in various territories and the Directors believe that the Group's certain products are eventually sold to the consumers through chain stores in various territories. The Group designs and offers to its customers products under its own brandnames which include Lashakier, Bag Kingdom and SuperSpeed.

The major markets of the group's products are the US, which accounted for approximately 71.1%, and Europe accounted for about 24.5% for the year ended 31 March 2001. Apart from the US and Europe, the Group also sells its products to Hong Kong, Japan and South America. The principally production facilities of the Group are located in Dongguan, the PRC. In addition, the Group has aback-up manufacturing base in Kabinburi District, Thailand that has been idle since July 2001.

According to the official statistics provided by Bureau of the Census of the US, from 1996 to 2000, the total value of the US general imports of travel goods increased from approximately US$3,583 million to US$4,430 million, representing an average annual growth rate of approximately 5.5%.

Based on the Annual Review of Hong Kong External Trade published by the Census and Statistics Department of Hong Kong, over 30% of Hong Kong's re-exports of travel goods, handbags and similar containers in value was exported to the US each year during the period from 1996 to 2000. In view of this, the Directors consider that the US will continue to be a significant market for the Hong Kong's exports of travel goods, handbags and similar containers in future.

The Directors believe that the Group has the following competitive advantages:

• its experienced and stable management team led by the founder of the Group who has over 25 years of experience in the handbag business;
• its strong experience in and knowledge of the manufacture and export of brandname products destined for the US and the European markets;
• its ability and experience of providing a wide product range by applying different materials that meet various demands for different retail seasons in the markets of the Group;
• its stringent quality control policy;
• its diversified base of creditworthy customers; and
• its strong design

• Should any of key personnel cease to be involved in the management of the Group in the future, there may be an adverse impact on the business and profitability of the Group.
• A sustained slump in the US economy will adversely affect the retail market and in turn has a negative impact on the business and profitability of the Group.
• In the event of that any of these customers does not purchase the products of the Group for any reason and replacement cannot be found, the business and profitability of the Group may be adversely affected.
• The Group has not encountered any difficulties in renewing the agreements in the past. However, in the event that the Group is unable to renew any of these agreements, the business and profitability of the Group may be adversely affected.

The US market is the largest market of the Group. The Directors consider that, in view of the current downturn of the US economy, the US consumers are likely to be more cautions on their spending while the retailers in the US have to be able to offer quality products at low prices in order to remain competitive. Accordingly, the Directors believe that competition in the handbag industry in the Us will remain severe in the future. The Group intends to further penetrate this marked by increasing efforts in the US to capitalize on its existing customer network and experience in this market.

In order to strengthen its strategy of securing sales order directly from large chain stores and retailer in US, it is the intention of the Group to expand tis marketing arm by employing more marketing executives in such market to handle more sales orders.

The Group plans to further strengthen its design and product development capabilities to produce more originally designed products and to place further emphasis on the design and marketing of high-end handbag products which command a better profit margin. The Directors believe that such strengthened ability will enable the Group to increase its market share in the major markets of the Group. To this end, the Group intends its design team and to further strengthen the experience of its designers by arranging them to attend more trade shows in order to keep abreast of the market trends.

In the long run, the Directors consider that the PRC will continue to be the largest manufacturing base for the world's handbag market as the PRC has become a member of the WTO. In line with the overall development of the business of the Group, the Directors will continue to upgrade its production facilities in the PRC, aiming to improve the production efficiency and to produce high quality products at competitive prices.

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